Gold and Silver Outlook for July 23

Following a slow week, the precious metals market reheated as both gold and silver spiked on the first business day of the week. Their rally wasn’t due to latest developments in the forex market although the US dollar did depreciate against leading currencies including Euro and Aussie dollar. The recent U.S housing data weren’t too positive as existing home sales slipped by 1.2% in June to reach an annual rate of 5.08 million. In my view, this news wasn’t enough to pull up gold and silver prices. Perhaps we have witnessed another short squeeze that could explain this rapid spike in gold and silver prices. If gold and silver will change direction today, this could suggest the short squeeze theory had some merit. On today’s agenda: Canada Retails Sales,Australia’s CPI for Q2 2013, andChina flash Manufacturing PMI.

On Monday, gold sharply increased by 3.33% to $1,336; Silver also spiked by 5.39% to $20.50 – its highest level since mid June. During July, gold rose by 9.17%; silver, by 5.39%.

The gold and silver futures volumes of trade have reached on Friday to 180 thousand and 23 thousand, respectively. These numbers are lower than the volume traded during the month. Conversely, the week started with high volumes of trade. If the volume will continue to rise in the coming days, this could pressure up the volatility of precious metals prices. The chart below shows the volume of trading gold and silver futures in the CME during the past several weeks.

On Today’s Agenda

Canada Retails Sales: This report will refer to the retails sales in Canada as of May. In the recent report regarding April 2013, retails sales inched down by 0.3%;

China flash Manufacturing PMI: this index is based on a survey covering 800 companies in 20 industries in China; in the previous HSBC Manufacturing PMI survey regarding June 2013 the Manufacturing PMI declined again to 48.3; this index indicates China’s manufacturing sectors have contracted at a slightly faster pace than in May; if the index will continue to contract, this may adversely affect precious metals prices;

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